Gold Prices Should Rise Above $1,900/oz -“Get In Now!”

Gold prices are likely to rise above $1,900/oz in the next phase of the bull market and investors should “get in now,” Chief Market Analyst of the Lindsey Group, Peter Boockvar told CNBC’s “Futures Now” yesterday.

“This is just the beginning of a new bull market in the metals,” Boockvar believes.

Ultimately, Boockvar believes that the 2011 highs of around $1,900 for gold are not only reachable, but surpassable, as he reasoned that bull markets historically exceed the previous bull market peak at some point.

As Boockvar sees it, it’s just a matter of when.

“In order to be bearish on gold, you have to believe that the Fed is going to embark on 100 to 200 basis points of hikes over the next couple of years, which I think is completely unrealistic,” added Boockvar. “This is an ideal opportunity for those who have not gotten in.”

Citing the relative strength index (RSI), Boockvar said that gold is the most oversold it has been since mid-December. He also added that global interest rates have given trillions of dollars’ worth of sovereign bonds a negative yield. Coupled with rising Fed rates, this development would theoretically provide gold investors with positive carry on gold. 

For additional context, Boockvar highlighted the mid-2000s, when the Fed raised the Federal funds rate from 1 percent to 5 percent. During that time, gold went from $400 to $700. The analyst also cited the start of 2016, when Bank of Japan Governor Haruhiko Kuroda adopted negative interest rates. However, the move failed to help the nation achieve stability in its currency.

Watch Boockvar’s interview on CNBC here

Recent Market Updates
– Gold and Silver “Bottom Is In” – David Morgan tells Max Keiser
– World’s Largest Asset Manager Suggests “Perfect Time” For Gold
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– Bank Bail-Ins Pose Risks To Depositors, Investors & Economies
– Take Delivery of Gold and Silver Coins, Store Gold Bars – Hobbs
– George Soros Buying Gold ETF And Gold Shares In Q1

Gold and Silver News
Gold edges up, but stays near 7-wk low on Fed rate hike outlook – Reuters
Gold Snaps Six-Day Losing Streak as Rally in the Dollar Pauses – Bloomberg
Oil prices top $50, Asian shares struggle as China sags – Reuters
Pound Could Lose Its Reserve Currency Status on Brexit, S&P Warns – Bloomberg
Brexit Could Force UK to Extend Austerity by Two Years – Bloomberg

Greece’s “breakthrough” agreement is another “extend and pretend” – Telegraph
Why Strategas’ Chris Verrone Wants to Buy Gold (Video) – Bloomberg
Global Monetary System Has Devalued 47% Over The Last 10 Years – Zero Hedge
The Billionaires Are Wrong On Gold – Barisheff via Seeking Alpha
Dominick Frisby interviews James Rickards – Frisby’s Bulls & Bears
Read More Here

Gold Prices (LBMA AM)
26 May: USD 1,226.65, EUR 1,097.24 and GBP 834.37 per ounce
25 May: USD 1,220.75, EUR 1,094.77 and GBP 834.63 per ounce
24 May: USD 1,242.65, EUR 1,111.18 and GBP 852.71 per ounce
23 May: USD 1,250.40, EUR 1,115.84 and GBP 860.89 per ounce
20 May: USD 1,256.50, EUR 1,120.18 and GBP 862.75 per ounce

Silver Prices (LBMA)
26 May: USD 16.46, EUR 14.73 and GBP 11.20 per ounce
25 May: USD 16.21, EUR 14.54 and GBP 11.06 per ounce
24 May: USD 16.27, EUR 14.55 and GBP 11.14 per ounce
23 May: USD 16.31, EUR 14.55 and GBP 11.27 per ounce
20 May: USD 16.56, EUR 14.76 and GBP 11.35 per ounce

Read Our Most Popular Guides in Recent Months

Mark O’Byrne

Executive Director

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Gold trading early this morning:

(courtesy zero hedge)

Sudden Dollar Dump Sparks Bond, Bullion Bid

It appears the weakness underlying the durable goods data is scaring the hawkish bid out of markets. 2Y yields are tumbling, the USD index is dropping, and gold is bid…

 

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Miner Sees Silver Price Surging Ninefold as Global Gadgets Boom

http://www.bloomberg.com/news/articles/2016-05-26/miner-sees-silver-price-surging-ninefold-as-global-gadgets-boom

 

A major Japanese electronics maker approached First Majestic Silver Corp. for the first time last month seeking to lock in future stock, a sign of supply concerns that could boost the metal’s price ninefold, according to the best-performing producer of the metal.

 

 

“For an electronics manufacturer to come directly to us — that tells me something is changing in the market,” said Keith Neumeyer, chief executive officer of First Majestic, the top stock in Canada and among its global peers this year. “I think we’ll see three-digit silver,” he said, predicting the metal could surge to $140 an ounce by as early as 2019.

 

The Bloomberg article:

 

Miner Sees Silver Price Surging Ninefold as Global Gadgets Boom

Natalie Obiko Pearson

A major Japanese electronics maker approached First Majestic Silver Corp. for the first time last month seeking to lock in future stock, a sign of supply concerns that could boost the metal’s price ninefold, according to the best-performing producer of the metal.

“For an electronics manufacturer to come directly to us – – that tells me something is changing in the market,” said Keith Neumeyer, chief executive officer of First Majestic, the top stock in Canada and among its global peers this year. “I think we’ll see three-digit silver,” he said, predicting the metal could surge to $140 an ounce by as early as 2019.

That’s a bold forecast. While silver has rallied 19 percent this year to leapfrog gold as the best-performing precious metal, it settled lower Wednesday at $16.26 an ounce on the Comex in New York and reached a record of just under $50 in 2011. The highest projection among analysts surveyed by Bloomberg is $57 an ounce in 2019.

“That seems aggressive,” Dan Denbow, a portfolio manager at the USAA Precious Metals & Minerals Fund in San Antonio, said by e-mail. “There has been a lack of investment in silver exploration, but with significantly higher prices you will get new supplies. The current cost curve wouldn’t support that price.”

For recent projections on global silver production, click here.

Still, there are other optimistic signs for silver rising. Hedge funds expanded their bullish bets on the metal to an all- time high earlier this month. Because the commodity holds appeal both as a store of value as well as for its multiple industrial uses, it surged earlier this year on speculation that the pace of U.S. interest-rate hikes will slow and that Chinese manufacturing may be improving.

First Majestic is the second-biggest silver producer in Mexico, which supplies more of the precious metal than any other country. As such, the company has been a primary beneficiary of the silver rally after choosing not to diversify into other metals like many of its peers. The company earns more than 63 percent of its sales from silver and its share price has more than tripled this year, more than any other company on the S&P/TSX Composite Index. The stock rose 2.2 percent to C$14.65 at 9:51 a.m. in Toronto, giving it a market value of C$2.36 billion ($1.82 billion).

‘Strategic Metal’

While long coveted for use in jewelry, coins and utensils, silver is increasingly in demand for its industrial applications. Last year, about half of global silver consumption came from such use, including mobile phones, flat-panel TVs, solar panels and alloys and solders, according to data compiled by GFMS for the Washington-based Silver Institute.

“Silver is not a precious metal, it’s a strategic metal,” Neumeyer said in an interview in Vancouver, where the company is based. “Silver is the most electrically conductive material on the planet other than gold, and gold is too expensive to use in circuit boards, solar panels, electric cars. As we electrify the planet, we require more and more silver. There’s no substitute for it.”

For a Bloomberg Intelligence overview of the silver market, click here.

Industrial demand is set to increase, driven by rising incomes and growing penetration of technology in populous, developing nations, as well as thanks to new uses being found for silver’s anti-bacterial and reflective properties in everything from hospital paints to Band-Aids to windows.

“Over the next 10 or 20 years, more and more people are going to be using these devices, and silver is a very limited commodity,” Neumeyer said. “There’s just not a lot of it around.”

Use of silver, including investment demand, coin sales and what goes into inventories to settle trades, has outstripped annual supply of the metal in every year since 2000, according to data from GFMS, a research unit of Thomson Reuters Corp. Still, not everyone agrees that the world is headed for a shortage of the metal.

“I would tend to disagree that silver is rarer than thought,” David Lennox, a resource analyst at Fat Prophets in Sydney. “Silver cannot be easily substituted but there’s been no need as it’s in abundance. I’d expect the search for silver would intensify and the search for substitutions would happen long before silver got to” $140 an ounce.

‘Market Penetration’

About 50 percent of global demand last year came from price-sensitive sources such as retail coins, jewelry and silverware, which would help curb price increases, said Erica Rannestad, a senior analyst at GFMS in Chicago. “Increased market penetration in emerging economies certainly will result in higher per-capita consumption of silver in industrial uses, but this is over the long run and would not happen overnight.”

Neumeyer said his company has no immediate plans for acquisitions, dividends or to take on any debt. The company raised C$57.5 million from a share sale earlier this month. It plans to use funds internally for development and exploration of its mines, which had suffered from underinvestment during the recent downturn. “The capital will be used to look internally,” he said.

Neumeyer acknowledges his forecasts aren’t always correct. First Majestic had estimated silver at $14 an ounce for this year’s budget. “I think I’ve been wrong every year for the past four or five years.”

Still, he’s unfazed by his past record.

“The silver rally is just beginning,” Neumeyer says. “What we’ve seen in the last two months is just the beginning of the next bull market.”

-END-

 

 

A great graphic of the London Gold Market and where gold is stored.  This is a repat from two weeks ago but it is worth repeating.

(courtesy Bullion star/Ronan Manly)

An Inside Look at the World’s Biggest Paper Gold Market

Every day, there are a whopping 5,500 tonnes ($212 billion) of gold traded in London, making it the largest wholesale and over-the-counter (OTC) market for gold in the world.

To put that in perspective, Visual Capitalist’s Jeff Desjardins notes that  more gold is traded in London each day than what is stored at Fort Knox (4,176 tonnes). On a higher volume day, amounts closer to total U.S. gold reserves (8,133.5 tonnes) can change hands.

How is this possible?

The infographic below tells the story about gold’s foremost trading hub, as well as the paper gold market in London, England:

Courtesy of: Visual Capitalist

London is dominant in global price discovery for gold.

In 2015, it accounted for roughly 88% of gold trade – most of which occurs between banks on behalf of their clients. Further, 90% of London trade is spot trading, which further emphasizes London’s importance in price discovery for gold markets.

While the high-level details of the market are visible, the individual mechanisms behind the London gold trade are less clear.There is very little detailed information provided on physical shipments, outstanding gold deposits or loans, allocated or unallocated gold, or clientele types. Trade reporting also breaks down at a more granular level, and datasets on the GOFO (Gold Forward Offered Rate) were also discontinued in January, 2015.

Almost all gold (95%) traded in London is unallocated and without legal title. This makes it easier to trade, but it also raises concerns about a market that is opaque to begin with. There are 5,500 tonnes of paper gold exchanging hands on paper each day, but there are only 300 tonnes of gold vaulted in London outside of the reserves for ETFs or the Bank of England.

What would happen if there was ever even a small rush to get the physical asset behind the paper? Is there a system in place for such an event, and how does it work?

Original graphic by: BullionStar

END

Nick Barisheff cannot figure out why billionaires are buying ETF’s like GLD which probably has no gold and not buying his bulllion fund which is 100% allocated like Central Fund and Sprott

(courtesy  GATA/Barisheff)

Nick Barisheff: The billionaires are wrong on gold

Submitted by cpowell on Thu, 2016-05-26 00:01. Section: Daily Dispatches

8p ET Wednesday, May 25, 2016

Dear Friend of GATA and Gold:

Nick Barisheff, founder of Bullion Management Group in Markham, Ontario, today laments that some prominent billionaires who advocate gold ownership have put their money not into real metal but into shares of exchange-traded funds whose claim to metal is dodgy at best. Barisheff’s commentary is headlined “The Billionaires Are Wrong on Gold” and it’s posted at Bullion Management Group’s Internet site here:

http://bmgbullion.com/billionaires-are-wrong-on-gold/

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

END

Your early THURSDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight

 

 

:

1 Chinese yuan vs USA dollar/yuan  UP to 6.5576 ( SLIGHT REVALUATION  BUT TINY/CHINA CONTINUES TO FIRE SHOTS ACROSS THE USA BOW/OFFSHORE YUAN NARROWS TO 6.5615 ) / Shanghai bourse  CLOSED UP 7.37 OR 0.26%  / HANG SANG CLOSED UP 29.06 OR 0.14%

2 Nikkei closed UP 15.11 OR 0.09% /USA: YEN FALLS TO 109.99

3. Europe stocks opened MOSTLY IN THE GREEN  /USA dollar index DOWN to 95.15/Euro UP to 1.1182

3b Japan 10 year bond yield: FALLS   TO -.112%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.99

3c Nikkei now WELL BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  49.85  and Brent: 50.11

3f Gold UP  /Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil UP for WTI and UP for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to 0.159%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate FALL to 7.29%/: 

3j Greek 10 year bond yield RISE to  : 7.17%   (YIELD CURVE NOW FLAT)

3k Gold at $1229.20/silver $16.49(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 23 in  roubles/dollar) 65.15-

3m oil into the 49 dollar handle for WTI and 49 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 109.08 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9910 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1081 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .159%

/German 8 year rate negative%!!!

3s The Greece ELA NOW at  71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.866% early this morning. Thirty year rate  at 2.664% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

In what has been another quiet overnight session, which unlike the past two days has not seen steep, illiquid gaps higher in US equity futures (the E-mini was up 3 points and accelerating to the upside as of this writing so there is still ample time for the momentum algos to go berserk), the main event was the price of Brent rising above $50 for the first time since November with WTI rising as high as $49.97.

As shown in the chart below, Brent crude surpassed $50 a barrel for the first time since November, lifting commodity companies and buoying currencies where oil is produced.

A drop in U.S. stockpiles and shrinking output in Nigeria and Venezuela contributed to the gains in Brent, which is up more than 80 percent from January’s low of $27.10. The Bloomberg Commodity Index rose to the highest in a week as metals also advanced, and miners in the Stoxx Europe 600 Index headed for their biggest three-day jump in more than a month.

Brent is recovering after tumbling to a 12-year low in January. Now, the International Energy Agency and Goldman Sachs Group Inc. say a glut is dissipating as low prices take their toll on supplies. That may leave prices high enough to alleviate the threat of deflation and still low enough that they don’t impinge on economic growth. “It could well be that we have arrived at a ‘sweet spot’ — low enough to support consumers and curtail industry job cuts, but not high enough to rile central banks and bond markets.” said Michael Ingram, a market strategist at BGC Partners.

Well, if US consumers didn’t benefit from low oil, they sure will benefit from higher “sweet spot” soil, supposedly.

As for markets, even the bulls are looking for an end to the latest torrid short squeeze: “It’s to be expected after the gains we’ve seen this week,” said Michael Hewson, a market analyst at CMC Markets in London. “The real test is whether or not we can sustain the gains of the last two days. There is a lack of conviction on the part of investors with respect to the overall direction of European stocks. I don’t see where that catalyst is coming from at the moment.”

And yet, the levitation continues, driven by hope that Yellen will give some further indication of what the Fed will do tomorrow when she speaks at Harvard. And, much to Jeff Gundlach’s dismay, the narrative has again shifted to “rate hikes are bullish” in a market which can’t remember what happened even 5 months ago. “Markets are now more accepting of a U.S. rate increase,” said Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co. “The thought is that an increase won’t stop the U.S. economy from growing, but if the global economy slows, they have the means to change their policy.”

Also notable was the drop in European peripheral bank shares after
Spain’s Banco Popular tumbled 20% on a €2BN share sale. As a result Spain’s benchmark IBEX 35 Index was the biggest decliner among western-European markets. World equities were little changed after the MSCI All-Country World
Index staged a 2 percent recovery in the previous two days after weeks
of stagnation. The Stoxx 600 was unchanged after its biggest two-day jump in three months. Futures on the S&P 500 were up 0.1%

The U.S. has durable goods orders data for April due as well as weekly jobless claims figures. In addition, leaders from the Group of Seven nations are meeting in Japan to discuss topics including economic policy, climate change and boosting infrastructure investment.

Market Wrap

• S&P 500 futures up than 0.1% to 2090
• Stoxx 600 down 0.1% to 348
• FTSE 100 up less than 0.1% to 6267
• DAX up 0.2% to 10226
• S&P GSCI Index up 0.4% to 372.3
• MSCI Asia Pacific up 0.3% to 127
• Nikkei 225 up less than 0.1% to 16772
• Hang Seng up 0.1% to 20397
• Shanghai Composite up 0.3% to 2822
• S&P/ASX 200 up 0.3% to 5388
• US 10-yr yield down less than 1bp to 1.86%
• German 10Yr yield up less than 1bp to 0.16%
• Italian 10Yr yield up less than 1bp to 1.36%
• Spanish 10Yr yield up 2bps to 1.49%
• Dollar Index down 0.15% to 95.21
• WTI Crude futures up 0.5% to $49.83
• Brent Futures up 0.6% to $50.02
• Gold spot up 0.3% to $1,228
• Silver spot up 0.5% to $16.40

Top Global News

• Lenovo Profit Misses Estimates as Motorola Smartphones Struggle
• UniCredit Said to Seek Buyers for $838 Million of Bad Loans
• Ubisoft Said to Seek White Knight to Fend Off Vivendi Approach
• Abe Warns G-7 Leaders of Risk of Lehman-Scale Economic Crisis
• Qatar Stuns Mideast Debt Market With Record $9 Billion Bond
• Hedge Funds May Lose 25% of Assets, Blackstone’s James Says

Looking at regional markets, Asian equities traded in modest positive territory underpinned by the continued oil increase. ASX 200 (+0.3%) was supported by the fresh YTD highs in crude futures in which Brent rose above USD 50/bbl, but the index then pared most of its advances following mixed Capex data. Nikkei 225 (+0.1%) is also positive although off its best levels as JPY strength clouds sentiment. Elsewhere, the Shanghai Comp (+0.3%) underperformed for much of Asian trade amid debt and financial sector concerns, as brokerages are seen to suffer from weaker activity, however did see a turnaround late on to conform with its counterparts.  This morning has seen thin volumes from a fixed income perspective with Bunds relatively flat for the session as some participants observe the Corpus Christi holiday while some remain on the side lines until the conclusion of the G7 summit. Additionally, the persistent upside in crude prices have weighed on the long end, subsequently reversing some of the bull flattening seen yesterday.

Top Asian News

• India Said to Require Local Sourcing by Apple to Open Stores: Minister said to rule Apple must comply with sourcing rules
• Macau Economy Seen at Risk as Moody’s Downgrades Gaming Hub: Agency expects Macau GDP to continue shrinking in 2016, 2017
• New Zealand Leaves Door Open to Tax Cuts as Budget Surplus Grows: Govt forecasts 2016-2017 budget surplus of NZ$719m
• Takata Said to Hold Talks With Possible Buyers Including KKR: Shares surged by daily limit after earlier report by Nikkei
• One Year After Bubble Burst, China’s Stock Market Has Gone Quiet: Volatility on the Shanghai Composite is lowest since 2014

European equities trade in mixed fashion with the Euro Stoxx 50 (+0.1%) modestly higher. Notable underperformance has been observed in periphery banks, particularly the Spanish banking sector after Banco Popular (-20%) reported that they are seeking to raise EUR 2Bn through a share sale. Elsewhere, energy and material names have been among the best peroformers amid the upside in the commodity complex with Brent crude futures continuing to hover around YTD highs to remain above USD 50/bbl, while WTI crude trades slightly south of that mark having earlier reached a high of USD 49.95/bbl.

Top European News

• Europe’s Troubles Pile Up at Home as Leaders Cross Globe for G-7: Cameron, Merkel, Renzi and Hollande facing domestic challenges. Brexit to French strikes, refugees and elections occupy voters
• Podemos Wants to Talk to Investors About Easing Spain’s Debt: Anti-establishment group wants longer duration, lower interest. Party seeking alliance with Socialists after June election
• VW Says Bonds Meet ECB Purchase Criteria Ahead of Market Return: Potential for ECB acquisitions ‘can only be good’ for carmaker. Company shut out of debt market following emissions scandal
• French Strikes Intensify as Government Holds Firm on Labor Law: CGT Union ‘doesn’t make the law,’ Prime Minister Valls Says. Unions split over protest as business warns of slowdown
• Telecom Italia Approves $45 Million Incentive Plan for CEO: Payout tied to turnaround plan for former phone monopoly. Two months into job, Cattaneo almost tripled cost-cut goals

In FX, the yen strengthened 0.2 percent. The Bloomberg Dollar Spot Index declined 0.2 percent following a 0.2 percent drop in the last session. The MSCI Emerging Markets Currency Index rose 0.2 percent, led by
currencies from commodity-producing countries. Russia’s ruble climbed
for a third day, advancing 0.4 percent. Higher oil prices supported the Norwegian krone, which rose 0.9 percent versus the greenback, and Malaysia’s ringgit, which advanced 0.5 percent.   A measure of volatility in the pound versus the dollar covering the period when the result of the referendum on European Union membership will be known jumped to its highest level in six years. The pound was little changed. The kiwi touched its weakest level since March after Fonterra Cooperative Group Ltd., the world’s largest dairy exporter and New Zealand’s biggest company, forecast a lower-than-expected payout to its farmer shareholders.

In commodities, Brent crude rose 0.3% at $50.06 a barrel at 10:39 a.m. in London and West Texas Intermediate climbed as high as $49.97 before retreating modestly.Bloomberg’s index of commodity returns gained 0.5 percent, rising for a second day. U.S. inventories slid by 4.23 million barrels last week, exceeding an expected drop of 2 million barrels. Attacks in Nigeria have cut production to a 20-year low and Venezuela is struggling to maintain output amid power cuts. Producers in Canada are beginning to restart oil-sands operations halted by wildfires.

French power for delivery in June climbed as much as 3.4 percent to 25.70 euros a megawatt-hour, the highest price since March 31, as a strike that has halted refineries across the nation spread to nuclear power plants. Output at 11 reactors operated by Electricite de France SA was reduced by the protests against a new labor law. Copper advanced 0.8 percent to $4,691 a metric ton, a third day of gains. The metal used in wires and cables is heading for the first weekly gain this month. Nickel added 0.6 percent and zinc rose 1.9 percent. Gold halted six days of losses to rebound from the lowest level in seven weeks as a rally in the dollar paused.

In the US, the big focus will be on the durable and capital goods orders for April. Current expectations are for a +0.5% mom in headline durable goods and +0.3% mom in core capex orders. Elsewhere, also due to be released this afternoon will be pending home sales for April which is expected to continue the run of strong housing market data, while last week’s initial jobless claims data will also be released (275k expected). The calendar will be rounded off with some more regional manufacturing data in the form of the Kansas City Fed’s manufacturing activity index. Fedspeak wise today we’ve got Bullard (at 6.10am) speaking at an event in Singapore, while Powell (at 12pm) is due to talk on ‘recent economic developments and monetary policy’.

Bulletin Headine Summary From Bloomberg and RanSquawk

• Underperformance observed in periphery banks after Banco Popular shares fall over 20% as they seek a EUR 2bIn share sale.
• GBP pares gains following downward revisions in the UK GBP Y/Y reading, while commodity linked currencies remain firm amid the persistent upside in crude prices.
• Later in the day we will be looking out for US Pending Home Sales, Durable Goods Orders and Initial Jobless Claims
• Treasuries slightly higher along with global equities as crude oil flirts with $50 a barrel mark; week’s auctions conclude with $28b 7Y notes, WI yield 1.68%, compares with 1.634% awarded in April.
• Japanese PM Shinzo Abe presented documents to his fellow G-7 leaders Thursday that he said indicated a risk of the world economy falling into a crisis on the scale of the 2008 Lehman shock if appropriate policy measures weren’t taken
• Qatar sold $9 billion of Eurobonds on Wednesday, helping push 2016 offerings from the Middle East and North Africa to $29.3 billion, a record for the first half of a year
• Bill Gross said he is moving to sell credit risk and insurance on market volatility rather than buying long-term debt, because he believes a day of reckoning will come when central banks will no longer be able to prop up asset prices
• U.S. billionaire Wilbur Ross said he’s considering investing in nonperforming loans in China, as Moody’s Investors Service said that the nation has the tools to prevent a financial crisis in the near term
• Spanish consumer strength boosted by job creation helped maintain growth momentum in the first quarter as the nation grappled with political deadlock. Household consumption rose 0.9% from the previous three months
• Sovereign 10Y yields mixed; European, Asian equities higher; U.S. equity-index futures rise; WTI crude oil higher, precious metals rally

DB’s Jim Reid concludes the overnight wrap

At the moment the Fed look like they have super powers. A week on from a hawkish set of FOMC minutes one would have to say that they have won the first round in the fight to raise rates in June or July. We’re still not convinced they’ll be able to and it seems reasonable to expect tougher rounds in the battle ahead but it’s worth highlighting the performance of a few global variables since just before the minutes were released last Wednesday night. Indeed, looking firstly at the moves in the US, the S&P 500 is up +1.62% from the moment just prior to the minutes despite what was an initial 24 hours of weakening, while the S&P 500 Banks sector has outperformed the wider equity index with a +3.34% gain. Meanwhile the US Dollar index has strengthened +0.81% and 2y and 10y Treasury yields are 7bps and 5bps higher respectively. Of course in that time we’ve also seen the probability of a June rate hike move from 12% to 34% and a July hike move from 28% to 54%.

Interestingly moves in Europe have actually been more impressive although the positive developments around Greece and the ECB commentary concerning banks has largely fuelled that, along with the weaker Euro (-1.21%). The Stoxx 600 is +3.26%, DAX +2.64% and Spanish and Italian equities are +3.96% and +2.77% (although we’d stress that much of this has come in the last two days) while Stoxx 600 Banks are up an impressive +7.24%. Emerging markets have been the obvious laggard with the MSCI EM equity index down -0.86%. WTI Oil (+0.38%) initially tumbled with the strength in the USD from $49.50/bbl to a low of $47.26/bbl, but has recovered all of that loss and a little more to test that $50/bbl mark again. Unsurprisingly it’s Gold (-3.90%) which is the main underperformer.

So you have to imagine that moves in the last week or so will be of reasonable comfort to the Fed. The last 48 hours in particular has been a strong one for risk assets with indices yesterday including the S&P 500 (+0.70%), Dow (+0.82%), Stoxx 600 (+1.29%) and DAX (+1.47%) all rallying again. Banks were again at the forefront of the moves although this time it was energy stocks which led all other sectors as both WTI and Brent edged closer and closer to the elusive $50/bbl level. This morning in fact has seen Brent just tip over that mark, currently hovering around $50.10/bbl and it’s managed to hold above $50/bbl for a couple of hours or so now. The move has been helped by the latest EIA stockpile data, along with a slightly weaker US Dollar which fuelled yesterday’s gains. Indeed crude stockpiles were reported as falling 4.2m barrels last week with the WSJ journal highlighting that a poll showed that ‘just’ a 2.5m decrease was expected. At the same time US output was also reported as falling for an 11th consecutive week. It wasn’t just equities which benefited from the move as credit markets also extended their strong run of gains. In Europe we saw the iTraxx Main and Crossover indices end 3bps and 12bps tighter while in the US CDX IG was 2.5bps tighter, meaning it is nearly 7bps tighter this week alone which compares to the S&P 500 which is just shy of 2% firmer. It’s also worth noting that all of a sudden US HY energy cash spreads are 18bps tighter in the last three sessions and 72bps tighter in the month of May. They are currently hovering around 904bps in spread terms which compares to the wides in spread of 1932bps back in February.

Back to markets and despite the positive lead from the US last night and the moves for Oil, it’s been a bit of a mixed start for equity bourses in Asia this morning. Japanese equities are shrugging off a reasonable strengthening in the Yen (+0.5%) to post modest gains (Nikkei +0.29%). Elsewhere the ASX and Kospi are flat, however the Hang Seng (-0.23%) and Shanghai Comp (-0.90%) have weakened despite minimal newsflow. Meanwhile we’re seeing decent gains for Oil-sensitive currencies (Norwegian Krone leading the way) while US equity index futures are modestly in the red.

Moving on. Yesterday’s economic data was a bit of a mixed bag across the pond. The advance goods trade balance for April showed a very modest widening in the deficit to $57.5bn from $57.1bn although expectations had been for a widening to $60bn. While imports rose as expected (by +1.9% mom), the surprise was the +2.4% mom increase in exports which will be seen as positive for Q2 GDP. Meanwhile the remainder of the flash May PMI’s were released too, with the services reading (51.2 vs. 53.0 expected) disappointing after declining 1.6pts from April. When combined with the manufacturing data earlier in the week, the flash composite print of 50.8 is also down 1.6pts from April. The only other data of note in the US yesterday was the FHFA house price index which was reported as increasing a higher than expected +0.7% mom in March.

Over in Europe the highlight was the better than expected German IFO survey for May. The business climate reading was up a full point from April to 107.7 (vs. 106.8 expected) thanks to similar gains in the current assessment (+1pt to 114.2) and expectations (+1.1pts to 101.6) components. This means that the business climate reading has now made up more than half of the decline it had seen from November (109.1) to February (105.8). Our economists in Europe noted that the data supports their expectation that GDP growth should bounce back in Q3 (they expect +0.5% qoq) after a weak Q2 (+0.1% qoq expected) that is impacted by seasonal factors and one-offs.

Staying in Europe and a bit more on the Greece announcement 24 hours ago. Most will have seen the details by now, with the €10bn disbursement having been approved with the first tranche due to be delivered in June, as well as the commitment for future debt relief in 2018. What appears to be more debated however is the IMF’s participation in all of this. While the Fund stated that it is willing to continue participating financially in the program, the decisions will be taken by the ‘end of this year’ subject to an ‘updated debt sustainability analysis’. As DB’s George Saravelos pointed out, the key muddle through aspect of the agreement is the fact that the IMF has managed to delay participation by another six months, so the ambiguity on whether the IMF ends up participating remains. Indeed the IMF’s main negotiator at the talks, Paul Thomsen, said that ‘we will need to assess the adequacy of the measures, and we will only go ahead if there is an assessment that they are adequate’. That said, yesterday’s announcement is still very much significant progress and keeps Greece on a familiar track of year-by-year deal making.
Before we look at today’s calendar, the latest stop on the Fedspeak tour saw Dallas Fed President Kaplan (moderately hawkish usually) say that should the economic data keep going the way it is then ‘I will advocate for an increase in the near future’. He also said that his view was unchanged relative to that in March when he indicated that two hikes this year could be appropriate. Kaplan refused to comment specifically on timing but did make mention of the UK EU referendum as representing ‘some amount of tail risk’.

Turning now to the day ahead, this morning in Europe the main highlight is the second reading for Q1 GDP in the UK where no change from the initial +0.4% qoq estimate is expected. Over in the US the big focus will be on the durable and capital goods orders for April. Current expectations are for a +0.5% mom in headline durable goods and +0.3% mom in core capex orders. Our US economists are more optimistic and are looking for a +1.0% mom rise in headline durable orders which should be propped up by Boeing orders. They do however expect ex-transportation orders to be flat for the month continuing the trend of weak business investment. Elsewhere, also due to be released this afternoon will be pending home sales for April which is expected to continue the run of strong housing market data, while last week’s initial jobless claims data will also be released (275k expected).

(courtesy zero hedge)